Mr Reid said the decision to sell fitted with the company’s commercial add-value business model. The proceeds would be recycled into Icon’s next project.

“We’re very proud of what we’ve achieved with the refurbishment of this iconic building. We’ve spent considerable funds restoring the arcade and carefully choosing quality tenants while still retaining its point of difference & character. We have also de-risked & stabilised the asset for the next owner and believe it will deliver superior long-term capital growth.”

St Kevins Arcade, outlined.

The arcade has 21 ground-floor & basement retail and food & beverage tenants, 6 upper-level commercial suites including a recording studio, 4 apartments and 4 storage & parking units. It has a 22m frontage to K Rd and steps down to Myers Park and the lower end of the cbd.

The refurbishment & restoration included a full interior & exterior repaint & retiling, new roofing and the reinstatement of historical corbels & leadlight glass. Modern building services such as new fibre cabling were also installed and the first-floor offices & amenities and 4 residential units were upgraded.

Bayleys agent Alan Haydock said the property had a weighted average lease term of about 3.5 years and many of the leases had fixed annual rental increases, which would provide the next owner with steady rental growth. Fellow agent Damien Bullick said retailers should also benefit from the opening of the nearby city rail link Karangahape Rd station, scheduled for 2023.

The first tender documents for the largest component of Auckland’s city rail link project – the construction of the tunnels & new stations – were released to the industry yesterday, a fortnight after expressions of interest were sought for the design, procurement, installation & commissioning of all tunnel track work & rail systems between Britomart Station & the Western Line at Mt Eden.

2 new stations will be built as part of the underground rail line linking Britomart with the existing western line near Mt Eden. The new stations will be near Aotea Square (artist’s impression at top), with entrances at Wellesley & Victoria Sts, and a station in Mercury Lane, just off Karangahape Rd. The Mt Eden train station will be extended & redeveloped. Associated works are already underway around downtown Auckland.

An artist’s impression of the new Karangahape station, which will be the deepest at 30m below ground.

Project director Chris Meale said yesterday the 2m-wide tunnel-boring machine simultaneously excavating & installing a new stormwater pipe under Albert St had finished the first leg of its journey. The 9-storey-high piling rig working in Albert St has dug over 140 of the 376 piles required.

An artist’s impression of the planned redeveloped station at Mt Eden.

The tunnels & stations contract will be procured using a design & construct model with a lump sum price based on a bespoke contract.

Bayleys agents have completed 2 more sales out of the agency’s first Total Property auction for the year, plus 3 more sales – in a price range from $1.15 million up to an industrial complex at $5.64 million.

17 Greenpark Rd:Features: refurbished1100m2 building on 1939m2 site zoned business 4 – 499m2 ground-floor showroom/office, 422m2 warehouse, 228m2 office, 25 parking spaces; owner is staying on as tenant for 16 months from settlementOutcome: sold for $2.5 million at a 6.4% yieldAgents: James Hill & James Valintine

Isthmus west

Avondale

30-32 Rosebank Rd:Features: 868m² elevated corner development site zoned business 4, next to the Avondale train station, comprising 2 industrial buildings & a bungalow totalling 322m², leased to 3 tenants; plans drawn up for a 32-apartment developmentRent: holding income of $44,416/year + gstOutcome: sold for $1.15 millionAgents: James Were & Scott Kirk

South

East Tamaki

42 Sir William Avenue (pictured above):Features: 4429m2 building on 7042m2 site comprising 3985m2 warehouse, 384m2 office, 60m2 amenities & 40 parking spaces, occupied since 1996 by Textile Bonding, which has renewed for 4 years from July 2015Rent: $415,925/year net + gstOutcome: sold for $5.64 million at a 7.4% yieldAgents: James Hill, Sunil Bhana & Mike Houlker

Barfoot & Thompson Commercial has reported 6 sales through from City Rd in one direction and to Newmarket in the other. They included 2 Kingsland villas sold for a land value of $2833/m² and a parking lot at the Grey Lynn end of Karangahape Rd for $3938/m².

CBD

Uptown

5 City Rd:Features: m², B grade historic scheduling, seismic rating of 31% new building standardRent: $125,000/year from 2 hospitality tenants on long leasesOutcome: sold for $1.775 million at a 7% yieldAgents: Cam Paterson

9 Morgan St:Features: 352m² site in mixed-use zoneRent: $53,072/year, leased until February 2016 with 2 2-year rights of renewalOutcome: sold for $1.41 million at a 3.76% yieldAgents: Cam Paterson & Dave Palmer

11 Morgan St:Features: 354m² site in mixed-use zoneRent: $88,105/year from 2 short-term leasesOutcome: sold for $1.7 million at a 5.18% yieldAgents: Cam Paterson & Dave Palmer

A 90-year-old Karangahape Rd building (pictured right) has been sold on an 8% yield, compared to 7.25% for the brand new $65 million building 3 at Mansons TCLM’s Telecom Place.

In 2 other sales by Bayleys agents, owner-occupiers have bought office units in Administrator House & the old South British Building – the South British one after being passed in at an auction in early June.

Old South British Building, 3-13 Shortland St, office unit 8B:Features: 373m², refurbished office unit split into 4 tenancies, purchaser will move into the one 106m² vacant tenancyRent: $74,567/year net + gst from 3 tenanciesOutcome: no bid at auction in June, sold now for $1.425 million at $3815/m²Agents: James Were & Scott Kirk

Uptown

208 Karangahape Rd: Features:670m2 site, 1920s-built 1532m2 3-level building with an IEP assessment of 21.9% of new building standard, ground-floor tenant Discount Mart has 6-year lease until March 2017 plus one 6-year right of renewal, and there’s a number of smaller monthly tenanciesOutcome: sold for $1.75 million at an 8% yieldAgents: Colin McKenna & James Chan

Victoria Quarter

Building 3 at Telecom Place (now Spark City).

Corner Victoria St West & Dock St:Features: 7495m² Building C at Telecom Place (now Spark City), fully leased to Telecom Corp of NZ Ltd (now Spark NZ Ltd) for 10 years from June 2014 with fixed annual rental increases of 3% for initial 10-year term, and with developer Mansons TCLM Ltd also providing a capital & defects warranty until 31 May 2024Outcome: sold to Augusta Funds Management Ltd for $65,186,117 at a 7.25% yield; Augusta is offering 780 $50,000 proportionate interests in the propertyAgent: Paul Hain

2 late-1980s commercial buildings just down from the Karangahape Rd ridge are gaining new life as residential conversions at the hands of father & son developers Mike & David Mahoney, of Tawera Group Ltd, and their family support team.

Reconstruction has started on the hexagonal 15 Hopetoun, the former Baycorp House which will be converted into 91 apartments, and the next Mahoney development, 8 Hereford, was launched to buyers on Thursday night.

Although the configuration for 8 Hereford was for 119 apartments, one buyer has taken the whole “front” on the top floor – with views to the cbd, harbour bridge and over Freemans Bay – 3 apartments to be combined into a 400m² interior with a 75m² deck.

15 Hopetoun, the first luxury apartment project in Auckland since 2007, secured 50 sales on opening night. Bayleys Real Estate chairman John Bayley said at the 8 Hereford opening: “Michael Mahoney has an uncanny ability. Not many people can pick the market and pick the sites.”

David Mahoney said in an interview during the week that, as they finished their conversion of the former Beca office building at 132 Vincent St, they saw the need for bigger floorplates and thought they had the answer at 15 Hopetoun.

“Unfortunately they weren’t big enough. We offered 104m², they wanted 200m² – the purchasers come from really big homes. Originally we thought 15 Hopetoun was going to be an easier project because it was smaller, but we kept going outside the existing floorplate for size.”

The floorplates are hexagonal, but the new design by Clark Brown Architects incorporates decks pushing further out – “something with more character & bulk,” David Mahoney said.

“Because of the new lift technology, most of the gear is in the shaft so we’re creating 3 extra levels, taking it from 9 levels to 12, but only going 1m higher.

“The bigger apartments were very popular and a few buyers have purchased more than one to get size – the largest one is 280m². The same has happened at 8 Hereford. One purchaser has bought the whole front on the top floor – 3 apartments of 145m², 125m² & 130m² on the design, to be turned into one of 400m² plus 75m² of deck.”

15 Hopetoun & its neighbour, No 9, were developed by Unity Group (Mark Wyborn & David Muller) in the 1980s as a contrasting pair rather than as identical twins. No 9 Hopetoun is a mix of apartments & commercial.

Across Hereford St, Hong Kong newspaper magnate Sally Aw, initially in partnership with local developer Baker Corp Group Ltd (John Baker), built their office tower in the same era, looking across to the cbd & harbour, with a line of shops & offices in the heritage Plaza building on Karangahape Rd. Western Park, Auckland Girls’ Grammar School and the motorway prevent any further development in front of them.

False ceilings will be taken out to raise ceiling heights to 2.7m and new glazing, plumbing, electrics & lifts will be installed, but David Mahoney said the conversion would still be much faster than a new-build: “We hope to start construction early next year and finish in mid-2016. To build from new, we’d be here 3 years. One of the real benefits I’ve found is the ability to take a purchaser around and show them the view from the physical space they will occupy.”

Unlike many apartment buildings, the focus here is on owner-occupiers: “You can’t make it work on a yield basis, they’re too big. It’ll wash its face, but capital gain is the main driver. If you’re looking for a yield, there’s other product that will do it better.

“We’re calling them apartments – ideally I’d like to see them as homes. On the fifth floor there will be a pool and a 110m² gym, a decent space rather than something poky. On the level above, there will be a theatre & library because a lot of the buyers are downsizing. A few apartments do have theatre rooms, but not all of them.

“We’ll have a concierge plus a live-in manager. I really want to take it to the next level. No one’s really done that in terms of service – for security, the personal touch, to be able to be welcomed home by your first name, really just to make life easier. I watch a lot of movies and I like that New York sort of thing, just going that extra mile.”

Sales exceeded $70 million before launch night, out of $140 million of apartments & parking spaces, which are being offered separately: “They’re an extra, not everyone wants one. We’ve got the ability to give at least 2/apartment, 478 in total at $50,000 each. The commercial premises will soak up quite a few, but I feel there will always be a surplus.”

Although the large decks might change calculations, Mr Mahoney said pricing based on internal areas ranged from the mid-$7000s/m² up to $13,000/m².

Image above: David Mahoney at 8 Hereford, with the cbd in the background.

Published 10 July 2014, updated 11 July:
An apartment in the old George Court department store building on Karangahape Rd proved the building’s popularity yesterday when it was sold at City Sales’ auction. An Uptown unit was passed in, but sold unconditionally the next day.

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The Bob Dey Property website is primarily about commercial & development property in Auckland, policies & strategies that impact on the sector, listed property securities and wider economic influences. It examines infrastructure, access & urban design issues, and presents ideas from around the world. The emphasis is on appropriate depth & context.